Ontario confirms test for rescission – Lexpert Magazine

The recent Ontario Court of Appeal decision in Mendoza v. Active Tire & Auto Inc. confirms the test for rescission under the Arthur Wishart Act (AWA), the legislation that governs the province’s franchise regime. The Court stipulates that the test is whether the disclosure made to the franchisee is “materially deficient” and that neither the actions nor the sophistication of the franchisee are relevant. In her article in the July/August 2017 issue of Lexpert Magazine, writer Elizabeth Raymer outlines the Court’s decision and examines the significance of the judgment by consulting Jennifer Dolman, Osler litigation partner and franchise law expert, for her opinion.

“It’s not a surprising result,” Jennifer says, “but I think it’s important because it puts to rest any notion that a franchisee could be found to be sufficiently informed, having been provided with a materially deficient disclosure document. That’s the end of the matter in terms of liability.”

Jennifer goes on to explain how important it is for franchisors to provide disclosure documents that are AWA-compliant since any mistakes can be “fatal.” In Mendoza, she says, the Court highlighted that proper disclosure documents are essential, adding that the “franchisee’s right should not be diminished by their sophistication or other subjective factors.”

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